If this sounds rather a cavalier – and perhaps not very helpful comment – it may be instructive to compare this to criminal law. The lawyers amongst you will know that generally, for a crime to be committed, there must not only be the fact of the act being committed, but also the intention to commit it. However, there are some cases, known as offences of strict liability, where it does not matter what your intentions or reasons were. A very good example is speeding – if you drive above the speed limit in a restricted area, you are committing an offence. It does not matter that you may have a very good reason for driving above the limit. Even the Fire Brigade and the Ambulance Service do not, as I understand it, have an exemption, although admittedly they are unlikely to be prosecuted.

In many areas of taxation your intentions will be relevant. For example, in deciding whether or not an activity is classed as trading, one of the ‘badges of trade’ is whether or not your motive is to make a profit (whether you do so or not!).  The areas to look out for are those where the legislation stipulates that a particular circumstance must apply. For example, in Capital Gains Tax, whether or not you are entitled to a specific relief depends upon your actions. You will not get Principal Private Residence Relief on the disposal of a property unless you have actually lived there (main residence), however briefly. The fact that you had every intention of moving in and were thwarted by circumstances will not, I’m afraid, cut any ice with HMRC.

This brings me to the issue of how you evidence your intentions. The key word here is probably ‘consistency’.  To draw another parallel from my legal brethren, in most cases of alleged fraud (which is not an offence of strict liability), the issue is not whether various transactions took place – usually there will be a paper trail. The question is whether or not the alleged perpetrator intended to defraud. Of course in many cases he will say he didn’t. However, the jury is entitled to infer from his course of action whether or not fraud was intended and, where his actions (or omissions) are consistent only with a fraudulent intent, it is likely that he will be found guilty.

It’s exactly the same with tax in cases where intention is a relevant factor. If you can point to a consistent series of actions which are consistent with your stated intention (especially if you can bring external evidence of these) then you are well on the way to proving your case.

Where intention may very well assist you (in cases where all that really matters is what transactions did, or did not, take place) is in the issue of penalties. The speeding motorist who was desperate to reach a dying relative will receive sympathetic consideration in assessing the penalty for the offense. So if you can show that you had a settled intention, this may well link in with the issue of ‘reasonable cause’ where you have in fact failed to disclose something (and therefore made an inaccurate return) owing to a reasonably held (albeit erroneous) belief.

Changes of plan, especially if due to unforeseen circumstances, should always be discussed with your accountant (beforehand!) to see how they affect your tax-planning strategy.

Do share with me any instances where change of intention have affected your tax strategy.